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3 Key Takeaways from Singapore Telecommunications Limited’s FY2018 Results

Singapore Telecommunications Limited (SGX: Z74), or Singtel for short, is one of the three major telecommunications companies in Singapore.

This morning, the firm announced its financial results for the financial year ended 31 March 2018 (FY2018). Let’s look at the main highlights from the announcement here.

Show me the money

Revenue rose 4.9% year-on-year to S$17.5 billion in FY2018, from S$16.7 billion in FY2017. EBITDA (earnings before interest, tax, depreciation and amortisation) inched up by 1.8% to S$5.1 billion while EBITDA margin came in at 29%, as compared to 29.9% in the previous year. The higher revenue and EBITDA was due to higher mobile and fixed broadband customer numbers in Australia and contributions from Singtel’s digital businesses.

Pre-tax profits from share of associates fell from S$2.9 billion to S$2.5 billion, a drop of 14.7%. The fall was due to lower profits at Airtel and Telkomsel as well as lower contribution from NetLink NBN Trust (SGX: CJLU), partly offset by higher contribution from Intouch.

Net profit grew 41.5% to S$5.5 billion as a result of gains from the divestment of NetLink NBN Trust and a strong performance by its core business.

Underlying net profit came down 8.4% to S$3.5 billion on the back of lower share of profits from Airtel and lower economic interest in NetLink NBN Trust, and higher depreciation and amortisation on network and spectrum investments. Airtel’s business was affected by intense competition and mandated cuts in mobile termination rates in India.

Diluted earnings per share for FY2018 was 33.35 Singapore cents, up from 23.91 Singapore cents a year ago.

As at 31 March 2018, Singtel had S$524.9 million in cash and cash equivalents, and total debt of S$10.4 billion. In comparison, a year ago, it had a cash hoard of S$533.8 million and total borrowings of S$11.2 billion.

Free cash flow for FY2018 improved by 18% to S$3.6 billion.

Ka-ching!

The board is recommending a final dividend of 10.7 cents per share, bringing the total dividend for FY2018 to 17.5 cents per share. The total dividend represents a payout ratio of 81% of underlying net profit and excludes the special dividend of 3.0 cents per share already paid in January 2018. In comparison, in FY2017, it paid out a total dividend of 17.5 cents per share.

Singtel said that it expects to “maintain its ordinary dividends of 17.5 cents per share for the next two financial years and thereafter, will revert to the payout of between 60% and 75% of underlying net profit”.

What the future holds?

As for the outlook, Singtel’s revenue for FY2019 is expected to grow by low single digit, and EBITDA is expected to be stable, as shown below:

Source: Singtel FY2018 earnings presentation

It also added that it expects its digitalisation, automation and other initiatives to enhance productivity, and bring about significant cost savings and avoidance of around S$500 million in FY2019. It aims to leverage these increased efficiencies to drive higher growth from the core business.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P owns units in NetLink NBN Trust.